Parol Evidence Rule II
Prof. Bill Long 2/11/05
The purpose of this essay is to do three things: (1) to clarify a point raised in class at the end of the hour regarding the relationship of trade terms to a "complete and exclusive" agreement; (2) to comment briefly on the notion of "consistent additional" terms; and (3) to give some examples which I would have given in class had we had time. I won't list the answers here, but will take a few minutes in class on 2/15 to go over the problems.
Trade Terms
Jim brought up a good comment/question at the end of class--whether a "complete and exclusive statement of the terms of the agreement (2-202(b))" would eliminate consideration only of "consistent additonal terms" or of trade terms (2-202(a)) also. In brief, the answer is only the former. This means that if you have a "complete and exclusive" agreement, the court may not consider the addition of "consistent additional terms," but it must take into consideration trade terms. Trade terms are therefore part of almost every contract for the sale of goods. The only times they are not part of the contract or not treated under the PER is when the parties have bargained expressly to exclude consideration of ("disclaim") various trade terms (such as U/T or C/D).
A Word on Consistent Additional Terms
As with 2-207, where we saw that the crucial point of interpretation was what was meant by a term in the buyer's AF that might "materially alter" the contract, so in 2-202 we see that the phrase "consistent additional term" is at the heart of what can be added to a contract that is not a "complete and exclusive" agreement. What is such a term? As you might expect, courts differ on what constitutes contradiction or consistency in the additional terms. The only Code language on the issue is in Cmt. 3. It provides:
"If the additional terms are such that, if agreed upon, they would certainly have been included in the document in the view of the court, then evidence of their alleged making must be kept from the trier of fact."
This is quite a "squishy" test, but what it suggests is that the PER will only eliminate those prior written or oral OR contemporaneous oral statements when you would have expected them to be in the written contract ("certainly [would] have been included").
The situation the drafters of the Code primarily had in mind was when the buyer was balking at signing a contract, but the seller, wanting to make a deal throws in something else orally as an incentive to get the buyer to sign. Now I think you can see this "reality" test. Is the something that is "thrown in" extra something that is so valuable or unusual that you would have expected it to be in the contract? If so, the PER excludes it from admissibility. It is not a "consistent additional term." A few problems will help clarify this.
Problems/Examples
1. B, a department store, buys many different colored shirts from S, a shirt manufacturer. Number of shirts anad price per shirt ($10) are specified in the contract. S packages them according to size but B expected them to be packaged according to color. Nothing in the contract specified packaging arrangments. Let's assume that the contract was not a "complete and exclusive" statement of the agreement. B sues and argues that sorting by color is a U/T in the shirt industry. I am not interested here in what would constitute a legitimate U/T. Rather, my question is: Does the PER forbid B from making such such an argument? Why or why not?
2. How about if B wanted to introduce C/D testimony. Would the PER forbid it? Now assume the contract was "complete and exclusive." Would your answer change for either question.
3. (The example that Krista was working on when class ended). B gets billed $10 per shirt for the shipment. She sends payment immediately, deducting 10%, and claims that it is standard industry practice to allow a 10% discount when payment is made immediately. Who prevails, and what role does the PER play in the argument, if S sues for breach of contract?
4. S produces lumber. B enters into a contract with S to purchase a quantity of "standard 2" X 4" lumber." When B receives the lumber he measures it and finds it is precisely 2" X 4". B sues on the theory that it is industry practice that a 2" X 4" piece of lumber is actually smaller: it is 1 1/2" X 3 1/2". Is this the same kind of question as 3 or is there a difference? If B sues, will it be able to introduce the U/T?
5. Let's assume the same contracting partners as in 4, but this time B is negotiating a contract for purchase of "1,000 bd. ft. of Grade B pine." B was reluctant to sign the contract, so S whispers to B, as an incentive, "I will make that 1,000 bd. ft. of Grade A pine just for you, no extra charge." B signs the "Grade B" contract. Does B have rights to Grade A pine?
6. Same partners as in 5, but this time A whispers to B, as an incentive, "I will make that 1,000 bd ft of Grade A for $1.00 more per bd foot (Note: this would be a good deal, but not a "giveaway")." Does B now have a right to Grade A pine if B signs the "Grade B" contract?
7. B goes to a car dealership on March 1 to purchase a new car from S. B is wavering on whether to sign a contract but S says, "If you buy the car as it is, I will throw in a pair of 80,000 mile tires rather than the standard 30,000 tires that are normally on a new car." B signs the agreement with no reference to the better tires. Can B enforce the oral promise or would it be forbidden by the PER?
8. How about if the dealer promises the following orally before B signs the contract: "I am so sure you will like the car that if you don't, you can return it and get your money back anytime this year."
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